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Congress avoids the "fiscal cliff"

In a rare New Year's Eve and New Year's Day vote, the House and Senate voted to pass a measure keeping the U.S. from falling over the "fiscal cliff." The bill passed the Senate by an 89-8 vote, while the House passed it by a 257-167 vote. Sens. Marco Rubio (R-FL) and Richard Shelby (R-AL) were among the eight senators to vote against the bill. Sen. Rubio released a statement saying, " "Rapid economic growth and job creation will be made more difficult under the deal reached here in Washington." On the House side, Reps. Spencer Bachus (R-AL), Robert Aderholt (R-AL), Gus Bilirakis (R-FL), Jo Bonner (R-AL), Mo Brooks (R-AL), Jeff Miller (R-FL), Richard Nugent (R-FL), Bill Posey (R-FL), David Rivera (R-FL), Tom Rooney (R-FL), Dennis Ross (R-FL) and Steve Southerland (R-FL) all voted no. 

By passing the measure, Congress averted wide tax increases and budget cuts scheduled to take effect on Jan. 1. The measure will raise taxes by about $600 billion over 10 years and it will also delay for two months across-the-board spending cuts otherwise set to begin slashing the budgets of the Pentagon and numerous domestic agencies.  

Some other highlights of the new bill:

  • For those earning $400,000 for individuals and $450,000 for couples will be taxed at a rate of 39.6 percent, up from the current 35 percent. It extends Pres. Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000
  • Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent
  • Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families increases from 15 percent to 20 percent.
  • Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loophole
  • Extends for five years the child tax credit, earned income tax credit, and an up to $2,500 tax credit for college tuition. Also extends for one year accelerated "bonus" depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity
  • Extends jobless benefits for the long-term unemployed for one year
  • Allows a two-percentage point cut in the payroll tax, first enacted two years ago, to lapse, which restores the payroll tax to 6.2 percent
  • Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rules changes on converting traditional individual retirement accounts into Roth IRAs

Keep checking back this week to see how the new bill will affect the NCUA and credit unions.